A wealth of research in recent decades has seen the economic approach to human behavior extended over many areas previously considered to belong to sociology, political science, law, and other ...
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A wealth of research in recent decades has seen the economic approach to human behavior extended over many areas previously considered to belong to sociology, political science, law, and other fields. Research has also shown that economics can provide insight into many aspects of sports, including soccer. This book uses soccer to test economic theories and document novel human behavior, thus illuminating economics through the world's most popular sport. The book offers unique and often startling insights into game theory and microeconomics, covering topics such as mixed strategies, discrimination, incentives, and human preferences. It also looks at finance, experimental economics, behavioral economics, and neuroeconomics. The book provides rich data sets and environments that shed light on universal economic principles in interesting and useful ways. It is essential reading for students, researchers, and sports enthusiasts as it shows what soccer can do for economics.Less

Beautiful Game Theory : How Soccer Can Help Economics

Ignacio Palacios-Huerta

Published in print: 2014-05-25

A wealth of research in recent decades has seen the economic approach to human behavior extended over many areas previously considered to belong to sociology, political science, law, and other fields. Research has also shown that economics can provide insight into many aspects of sports, including soccer. This book uses soccer to test economic theories and document novel human behavior, thus illuminating economics through the world's most popular sport. The book offers unique and often startling insights into game theory and microeconomics, covering topics such as mixed strategies, discrimination, incentives, and human preferences. It also looks at finance, experimental economics, behavioral economics, and neuroeconomics. The book provides rich data sets and environments that shed light on universal economic principles in interesting and useful ways. It is essential reading for students, researchers, and sports enthusiasts as it shows what soccer can do for economics.

Complexity science—made possible by modern analytical and computational advances—is changing the way we think about social systems and social theory. Unfortunately, economists’ policy models have not ...
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Complexity science—made possible by modern analytical and computational advances—is changing the way we think about social systems and social theory. Unfortunately, economists’ policy models have not kept up and are stuck in either a market fundamentalist or government control narrative. While these standard narratives are useful in some cases, they are damaging in others, directing thinking away from creative, innovative policy solutions. This book outlines a new, more flexible policy narrative, which envisions society as a complex evolving system that is uncontrollable but can be influenced. The book describes how economists and society became locked into the current policy framework, and lay out fresh alternatives for framing policy questions. Offering original solutions to stubborn problems, the complexity narrative builds on broader philosophical traditions, such as those in the work of John Stuart Mill, to suggest initiatives that the authors call “activist laissez-faire” policies. The book develops innovative bottom-up solutions that, through new institutional structures such as for-benefit corporations, channel individuals’ social instincts into solving societal problems, making profits a tool for change rather than a goal. It argues that a central role for government in this complexity framework is to foster an ecostructure within which diverse forms of social entrepreneurship can emerge and blossom.Less

Complexity and the Art of Public Policy : Solving Society's Problems from the Bottom Up

David ColanderRoland Kupers

Published in print: 2016-02-16

Complexity science—made possible by modern analytical and computational advances—is changing the way we think about social systems and social theory. Unfortunately, economists’ policy models have not kept up and are stuck in either a market fundamentalist or government control narrative. While these standard narratives are useful in some cases, they are damaging in others, directing thinking away from creative, innovative policy solutions. This book outlines a new, more flexible policy narrative, which envisions society as a complex evolving system that is uncontrollable but can be influenced. The book describes how economists and society became locked into the current policy framework, and lay out fresh alternatives for framing policy questions. Offering original solutions to stubborn problems, the complexity narrative builds on broader philosophical traditions, such as those in the work of John Stuart Mill, to suggest initiatives that the authors call “activist laissez-faire” policies. The book develops innovative bottom-up solutions that, through new institutional structures such as for-benefit corporations, channel individuals’ social instincts into solving societal problems, making profits a tool for change rather than a goal. It argues that a central role for government in this complexity framework is to foster an ecostructure within which diverse forms of social entrepreneurship can emerge and blossom.

Why do humans, uniquely among animals, cooperate in large numbers to advance projects for the common good? Contrary to the conventional wisdom in biology and economics, this generous and civic-minded ...
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Why do humans, uniquely among animals, cooperate in large numbers to advance projects for the common good? Contrary to the conventional wisdom in biology and economics, this generous and civic-minded behavior is widespread and cannot be explained simply by far-sighted self-interest or a desire to help close genealogical kin. This book shows that the central issue is not why selfish people act generously, but instead how genetic and cultural evolution has produced a species in which substantial numbers make sacrifices to uphold ethical norms and to help even total strangers. The book describes how, for thousands of generations, cooperation with fellow group members has been essential to survival. Groups that created institutions to protect the civic-minded from exploitation by the selfish flourished and prevailed in conflicts with less cooperative groups. Key to this process was the evolution of social emotions such as shame and guilt, and our capacity to internalize social norms so that acting ethically became a personal goal rather than simply a prudent way to avoid punishment. Using experimental, archaeological, genetic, and ethnographic data to calibrate models of the coevolution of genes and culture as well as prehistoric warfare and other forms of group competition, the book provides a compelling and novel account of human cooperation.Less

A Cooperative Species : Human Reciprocity and Its Evolution

Samuel BowlesHerbert Gintis

Published in print: 2011-06-20

Why do humans, uniquely among animals, cooperate in large numbers to advance projects for the common good? Contrary to the conventional wisdom in biology and economics, this generous and civic-minded behavior is widespread and cannot be explained simply by far-sighted self-interest or a desire to help close genealogical kin. This book shows that the central issue is not why selfish people act generously, but instead how genetic and cultural evolution has produced a species in which substantial numbers make sacrifices to uphold ethical norms and to help even total strangers. The book describes how, for thousands of generations, cooperation with fellow group members has been essential to survival. Groups that created institutions to protect the civic-minded from exploitation by the selfish flourished and prevailed in conflicts with less cooperative groups. Key to this process was the evolution of social emotions such as shame and guilt, and our capacity to internalize social norms so that acting ethically became a personal goal rather than simply a prudent way to avoid punishment. Using experimental, archaeological, genetic, and ethnographic data to calibrate models of the coevolution of genes and culture as well as prehistoric warfare and other forms of group competition, the book provides a compelling and novel account of human cooperation.

The concept of general equilibrium, one of the central components of economic theory, explains the behavior of supply, demand, and prices by showing that supply and demand exist in balance through ...
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The concept of general equilibrium, one of the central components of economic theory, explains the behavior of supply, demand, and prices by showing that supply and demand exist in balance through pricing mechanisms. The mathematical tools and properties for this theory have developed over time to accommodate and incorporate developments in economic theory, from multiple markets and economic agents to theories of production. This book offers an extensive, up-to-date look at the standard theory of general equilibrium, to which the author has been a major contributor. This book explains how the equilibrium manifold approach can be usefully applied to the general equilibrium model, from basic consumer theory and exchange economies to models with private ownership of production. The book examines properties of the standard general equilibrium model that are beyond traditional existence and optimality. It applies the theory of smooth manifolds and mappings to the multiplicity of equilibrium solutions and related discontinuities of market prices. The economic concepts and differential topology methods presented in this book are accessible, clear, and relevant, and no prior knowledge of economic theory is necessary. The book offers a comprehensive foundation for the most current models of economic theory and is ideally suited for graduate economics students, advanced undergraduates in mathematics, and researchers in the field.Less

General Equilibrium Theory of Value

Yves Balasko

Published in print: 2011-08-14

The concept of general equilibrium, one of the central components of economic theory, explains the behavior of supply, demand, and prices by showing that supply and demand exist in balance through pricing mechanisms. The mathematical tools and properties for this theory have developed over time to accommodate and incorporate developments in economic theory, from multiple markets and economic agents to theories of production. This book offers an extensive, up-to-date look at the standard theory of general equilibrium, to which the author has been a major contributor. This book explains how the equilibrium manifold approach can be usefully applied to the general equilibrium model, from basic consumer theory and exchange economies to models with private ownership of production. The book examines properties of the standard general equilibrium model that are beyond traditional existence and optimality. It applies the theory of smooth manifolds and mappings to the multiplicity of equilibrium solutions and related discontinuities of market prices. The economic concepts and differential topology methods presented in this book are accessible, clear, and relevant, and no prior knowledge of economic theory is necessary. The book offers a comprehensive foundation for the most current models of economic theory and is ideally suited for graduate economics students, advanced undergraduates in mathematics, and researchers in the field.

In the global economy, linguistic diversity influences economic and political development as well as public policies in positive and negative ways. It leads to financial costs, communication ...
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In the global economy, linguistic diversity influences economic and political development as well as public policies in positive and negative ways. It leads to financial costs, communication barriers, divisions in national unity, and, in some extreme cases, conflicts and war—but it also produces benefits related to group and individual identity. What are the specific advantages and disadvantages of linguistic diversity and how does it influence social and economic progress? This book examines linguistic diversity as a global social phenomenon and considers what degree of linguistic variety might result in the greatest economic good. The book looks at linguistic proximity between groups and between languages. It describes and uses simple economic, linguistic, and statistical tools to measure diversity's impact on growth, development, trade, the quality of institutions, translation issues, voting patterns in multinational competitions, and the likelihood and intensity of civil conflicts. The book addresses the choosing of core languages in a multilingual community, such as the European Union, and argues that although too many official languages might harm cohesiveness, efficiency, and communication, reducing their number brings about alienation and disenfranchisement of groups. Demonstrating that the value and drawbacks of linguistic diversity are universal, the book suggests ways for designing appropriate linguistic policies for today's multilingual world.Less

How Many Languages Do We Need? : The Economics of Linguistic Diversity

Victor GinsburghShiomo Weber

Published in print: 2011-04-24

In the global economy, linguistic diversity influences economic and political development as well as public policies in positive and negative ways. It leads to financial costs, communication barriers, divisions in national unity, and, in some extreme cases, conflicts and war—but it also produces benefits related to group and individual identity. What are the specific advantages and disadvantages of linguistic diversity and how does it influence social and economic progress? This book examines linguistic diversity as a global social phenomenon and considers what degree of linguistic variety might result in the greatest economic good. The book looks at linguistic proximity between groups and between languages. It describes and uses simple economic, linguistic, and statistical tools to measure diversity's impact on growth, development, trade, the quality of institutions, translation issues, voting patterns in multinational competitions, and the likelihood and intensity of civil conflicts. The book addresses the choosing of core languages in a multilingual community, such as the European Union, and argues that although too many official languages might harm cohesiveness, efficiency, and communication, reducing their number brings about alienation and disenfranchisement of groups. Demonstrating that the value and drawbacks of linguistic diversity are universal, the book suggests ways for designing appropriate linguistic policies for today's multilingual world.

“Little else is required to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought ...
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“Little else is required to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.” So wrote Adam Smith a quarter of a millennium ago. Using the tools of modern political economics and combining economic theory with a bird's-eye view of the data, this book reinterprets Smith's pillars of prosperity to explain the existence of development clusters—places that tend to combine effective state institutions, the absence of political violence, and high per-capita incomes. To achieve peace, the book stresses the avoidance of repressive government and civil conflict. Easy taxes, the book argues, refers not to low taxes, but a tax system with widespread compliance that collects taxes at a reasonable cost from a broad base, like income. And a tolerable administration of justice is about legal infrastructure that can support the enforcement of contracts and property rights in line with the rule of law. The book shows that countries tend to enjoy all three pillars of prosperity when they have evolved cohesive political institutions that promote common interests, guaranteeing the provision of public goods. In line with much historical research, international conflict has also been an important force behind effective states by fostering common interests. The absence of common interests and/or cohesive political institutions can explain the existence of very different development clusters in fragile states that are plagued by poverty, violence, and weak state capacity.Less

Pillars of Prosperity : The Political Economics of Development Clusters

Timothy BesleyTorsten Persson

Published in print: 2011-08-28

“Little else is required to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.” So wrote Adam Smith a quarter of a millennium ago. Using the tools of modern political economics and combining economic theory with a bird's-eye view of the data, this book reinterprets Smith's pillars of prosperity to explain the existence of development clusters—places that tend to combine effective state institutions, the absence of political violence, and high per-capita incomes. To achieve peace, the book stresses the avoidance of repressive government and civil conflict. Easy taxes, the book argues, refers not to low taxes, but a tax system with widespread compliance that collects taxes at a reasonable cost from a broad base, like income. And a tolerable administration of justice is about legal infrastructure that can support the enforcement of contracts and property rights in line with the rule of law. The book shows that countries tend to enjoy all three pillars of prosperity when they have evolved cohesive political institutions that promote common interests, guaranteeing the provision of public goods. In line with much historical research, international conflict has also been an important force behind effective states by fostering common interests. The absence of common interests and/or cohesive political institutions can explain the existence of very different development clusters in fragile states that are plagued by poverty, violence, and weak state capacity.

This book presents a stochastic theory of games that unites probabilistic choice models developed in psychology and statistics with the Nash equilibrium approach of classical game theory. Nash ...
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This book presents a stochastic theory of games that unites probabilistic choice models developed in psychology and statistics with the Nash equilibrium approach of classical game theory. Nash equilibrium assumes precise and perfect decision making in games, but human behavior is inherently stochastic and people realize that the behavior of others is not perfectly predictable. In contrast, quantal response equilibrium models choice behavior as probabilistic and extends classical game theory into a more realistic and useful framework with broad applications for economics, political science, management, and other social sciences. This book spans the range from basic theoretical foundations to examples of how the principles yield useful predictions and insights in strategic settings, including voting, bargaining, auctions, public goods provision, and more. The approach provides a natural framework for estimating the effects of behavioral factors like altruism, reciprocity, risk aversion, judgment fallacies, and impatience. New theoretical results push the frontiers of models that include heterogeneity, learning, and well-specified behavioral modifications of rational choice and rational expectations. The empirical relevance of the theory is enhanced by discussion of data from controlled laboratory experiments, along with a detailed users' guide for estimation techniques. The book makes pioneering game-theoretic methods and interdisciplinary applications available to a wide audience.Less

Quantal Response Equilibrium : A Stochastic Theory of Games

Jacob K. GoereeCharles A. HoltThomas R. Palfrey

Published in print: 2016-06-28

This book presents a stochastic theory of games that unites probabilistic choice models developed in psychology and statistics with the Nash equilibrium approach of classical game theory. Nash equilibrium assumes precise and perfect decision making in games, but human behavior is inherently stochastic and people realize that the behavior of others is not perfectly predictable. In contrast, quantal response equilibrium models choice behavior as probabilistic and extends classical game theory into a more realistic and useful framework with broad applications for economics, political science, management, and other social sciences. This book spans the range from basic theoretical foundations to examples of how the principles yield useful predictions and insights in strategic settings, including voting, bargaining, auctions, public goods provision, and more. The approach provides a natural framework for estimating the effects of behavioral factors like altruism, reciprocity, risk aversion, judgment fallacies, and impatience. New theoretical results push the frontiers of models that include heterogeneity, learning, and well-specified behavioral modifications of rational choice and rational expectations. The empirical relevance of the theory is enhanced by discussion of data from controlled laboratory experiments, along with a detailed users' guide for estimation techniques. The book makes pioneering game-theoretic methods and interdisciplinary applications available to a wide audience.

A common set of mathematical tools underlies dynamic optimization, dynamic estimation, and filtering. This book uses these tools to create a class of econometrically tractable models of prices and ...
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A common set of mathematical tools underlies dynamic optimization, dynamic estimation, and filtering. This book uses these tools to create a class of econometrically tractable models of prices and quantities. The book presents examples from microeconomics, macroeconomics, and asset pricing. The models are cast in terms of a representative consumer. While the book demonstrates the analytical benefits acquired when an analysis with a representative consumer is possible, it also characterizes the restrictiveness of assumptions under which a representative household justifies a purely aggregative analysis. The book unites economic theory with a workable econometrics while going beyond and beneath demand and supply curves for dynamic economies. It constructs and applies competitive equilibria for a class of linear-quadratic-Gaussian dynamic economies with complete markets. The book, based on the 2012 Gorman lectures, stresses heterogeneity, aggregation, and how a common structure unites what superficially appear to be diverse applications. An appendix describes MATLAB programs that apply to the book's calculations.Less

Recursive Models of Dynamic Linear Economies

Lars Peter HansenThomas J. Sargent

Published in print: 2013-12-26

A common set of mathematical tools underlies dynamic optimization, dynamic estimation, and filtering. This book uses these tools to create a class of econometrically tractable models of prices and quantities. The book presents examples from microeconomics, macroeconomics, and asset pricing. The models are cast in terms of a representative consumer. While the book demonstrates the analytical benefits acquired when an analysis with a representative consumer is possible, it also characterizes the restrictiveness of assumptions under which a representative household justifies a purely aggregative analysis. The book unites economic theory with a workable econometrics while going beyond and beneath demand and supply curves for dynamic economies. It constructs and applies competitive equilibria for a class of linear-quadratic-Gaussian dynamic economies with complete markets. The book, based on the 2012 Gorman lectures, stresses heterogeneity, aggregation, and how a common structure unites what superficially appear to be diverse applications. An appendix describes MATLAB programs that apply to the book's calculations.

The general assumption that social policy should be utilitarian—that society should be organized to yield the greatest level of welfare—leads inexorably to increased government interventions. ...
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The general assumption that social policy should be utilitarian—that society should be organized to yield the greatest level of welfare—leads inexorably to increased government interventions. Historically, however, the science of economics has advocated limits to these interventions for utilitarian reasons and because of the assumption that people know what is best for themselves. But more recently, behavioral economics has focused on biases and inconsistencies in individual behavior. Based on these developments, governments now prescribe the foods we eat, the apartments we rent, and the composition of our financial portfolios. This book takes on this rise of paternalism and its dangers for individual freedoms, and examines how developments in economics and the social sciences are leading to greater government intrusion in our private lives. The book posits that the utilitarian foundations of individual freedom promoted by traditional economics are fundamentally flawed. When combined with developments in social science that view the individual as incapable of making rational and responsible choices, utilitarianism seems to logically call for greater governmental intervention in our lives. Arguing that this cannot be defended on purely instrumental grounds, the book calls for individual liberty to be restored as a central value in our society. Exploring how behavioral economics is contributing to the excessive rise of paternalistic interventions, this book presents a controversial challenge to the prevailing currents in economic and political discourse.Less

The Tyranny of Utility : Behavioral Social Science and the Rise of Paternalism

Gilles Saint-Paul

Published in print: 2011-07-25

The general assumption that social policy should be utilitarian—that society should be organized to yield the greatest level of welfare—leads inexorably to increased government interventions. Historically, however, the science of economics has advocated limits to these interventions for utilitarian reasons and because of the assumption that people know what is best for themselves. But more recently, behavioral economics has focused on biases and inconsistencies in individual behavior. Based on these developments, governments now prescribe the foods we eat, the apartments we rent, and the composition of our financial portfolios. This book takes on this rise of paternalism and its dangers for individual freedoms, and examines how developments in economics and the social sciences are leading to greater government intrusion in our private lives. The book posits that the utilitarian foundations of individual freedom promoted by traditional economics are fundamentally flawed. When combined with developments in social science that view the individual as incapable of making rational and responsible choices, utilitarianism seems to logically call for greater governmental intervention in our lives. Arguing that this cannot be defended on purely instrumental grounds, the book calls for individual liberty to be restored as a central value in our society. Exploring how behavioral economics is contributing to the excessive rise of paternalistic interventions, this book presents a controversial challenge to the prevailing currents in economic and political discourse.

Understanding the dynamic evolution of the yield curve is critical to many financial tasks, including pricing financial assets and their derivatives, managing financial risk, allocating portfolios, ...
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Understanding the dynamic evolution of the yield curve is critical to many financial tasks, including pricing financial assets and their derivatives, managing financial risk, allocating portfolios, structuring fiscal debt, conducting monetary policy, and valuing capital goods. Unfortunately, most yield curve models tend to be theoretically rigorous but empirically disappointing, or empirically successful but theoretically lacking. This book proposes two extensions of the classic yield curve model of Nelson and Siegel that are both theoretically rigorous and empirically successful. The first extension is the dynamic Nelson–Siegel model (DNS), while the second takes this dynamic version and makes it arbitrage-free (AFNS). The book shows how these two models are just slightly different implementations of a single unified approach to dynamic yield curve modeling and forecasting. They emphasize both descriptive and efficient-markets aspects, they pay special attention to the links between the yield curve and macroeconomic fundamentals, and they show why DNS and AFNS are likely to remain of lasting appeal even as alternative arbitrage-free models are developed. Based on the Econometric and Tinbergen Institutes Lectures, the book contains essential tools with enhanced utility for academics, central banks, governments, and industry.Less

Francis X. DieboldGlenn D. Rudebusch

Published in print: 2013-01-15

Understanding the dynamic evolution of the yield curve is critical to many financial tasks, including pricing financial assets and their derivatives, managing financial risk, allocating portfolios, structuring fiscal debt, conducting monetary policy, and valuing capital goods. Unfortunately, most yield curve models tend to be theoretically rigorous but empirically disappointing, or empirically successful but theoretically lacking. This book proposes two extensions of the classic yield curve model of Nelson and Siegel that are both theoretically rigorous and empirically successful. The first extension is the dynamic Nelson–Siegel model (DNS), while the second takes this dynamic version and makes it arbitrage-free (AFNS). The book shows how these two models are just slightly different implementations of a single unified approach to dynamic yield curve modeling and forecasting. They emphasize both descriptive and efficient-markets aspects, they pay special attention to the links between the yield curve and macroeconomic fundamentals, and they show why DNS and AFNS are likely to remain of lasting appeal even as alternative arbitrage-free models are developed. Based on the Econometric and Tinbergen Institutes Lectures, the book contains essential tools with enhanced utility for academics, central banks, governments, and industry.

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